The Economic Value of a College Degree

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The Economic Value of a College Degree

• 1 Million And More

Arizona State University    Last updated
08-17-07  
www.asu.edu/asu101
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On average, the more education you complete, the
more money you earn.
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The Value of a College Education

• Bachelors degree holders earn on average 75
  more than high school graduates.
• This adds up to about 1 million over a lifetime.

Source US Census Bureau, Current Population
Survey, March 2003 Demographic Supplement
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The Value of a College Education
A college degree also has many non-monetary
benefits that lead to a higher quality of life.

• Longer life expectancy and better health
• Women with college degrees live on average 4
  years longer than women with high school degrees.
• Greater participation in community and volunteer
  activities
• College grads are active in their communities 50
  more than those with only a high school degree.

Source Why College? Private Correlates of
Educational Attainment Postsecondary Education
Opportunity, March 1999
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The Value of a College Education

• Better academic performance for college
  graduates children
• Children of college grads score higher on
  national tests of math, reading, and writing
  skills.
• Greater awareness of current events and
  government
• College graduates are more likely to read the
  newspaper at least once a week.
• Much greater participation in arts and leisure
  activities
• College grads are more than 50 more likely
  to go to the movies at least once per year.

Source Why College? Private Correlates of
Educational Attainment Postsecondary Education
Opportunity, March 1999
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The Value of a College Education is Increasing

• For full-time male workers between the ages of 35
  and 44, the earnings premium associated with
  having a bachelors degree versus a high school
  diploma has risen from 38 in 1980-84 to 94
  percent in 2000-03.

The bottom line a college degree has a greater
impact on earnings today than ever before.
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Investing in Education

• If we look at a college degree as an investment,
  we see it has a greater return than the stock
  market.
• Annual net return on college 12 per year, over
  and above inflation.
• Annual net return on stocks 7 per year, on
  average.

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Education and Careers
In times of rapid technological progress (like
now!), workers with critical thinking skills
adapt to innovations far better than those
without such skills.
In college, youll develop the critical thinking
and continuous learning skills required in the
modern workplace. Plus, college graduates have
lower unemployment, steadier employment, and much
better opportunities for advancing their careers.
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Education and Careers
A high school graduate can expect to earn 28,000
by age 25, but earns on average only 35,000 by
age 55, if still employed.
A college graduate earns 40,000 at age 25 and
65,000 by age 55.
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Lifetime Value
Careers that require a college degree are far
more likely to have benefits such as health
insurance, retirement plans, and paid vacations.
Adding these to salary, it is easy to imagine a
college degree worth several million dollars over
your lifetime.
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Lifetime Value

• A standard health plan costs more than a 1,000 a
  month for a family of 4. An employer provided
  plan usually costs a small fraction of this,
  saving as much as 10,000 per year. Over 25
  years, this saves 250,000!
• A college grad with the normal salary progression
  contributing 5 of their income a year into a
  pension plan with an employer match will
  accumulate 849,000 by age 62 at the average
  growth rate for stocks.
• A high school grad who contributes 5 of their
  income without an employer match will accumulate
  171,000 by age 62.

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Lifetime Value

• Attending classes diligently and alertly is a key
  to college success, no matter how boring your
  professor may be.
• You should spend 15 hours per week in a classroom
  for 30 weeks each of your 4 years at ASU, leading
  to a degree.
• This is 1,111 of lifetime value per hour spent
  in the classroom.

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Lifetime Value
Studying 555/hour

• Studying an average of three hours per credit
  hour per week instead of one hour is quite often
  the difference between passing and failing.
• The extra hours studying can be worth 555
  prorated per extra hour.

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The College Experience
Before hitting the snooze button and skipping
class, consider the value of that class to
you. Before deciding to replace three hours of
studying with three hours of partying, consider
the value of those study hours to you. Do your
socializing after you complete your studying.
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The College Experience
Before agreeing to work an extra 10 hours per
week for extra spending money and replacing 10
hours of studying, compare the hourly pay of the
job with the lifetime value of studying.
8/ hour x 10 hours 80 ---------or--------- 55
5/hour x 10 hours 5,550
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The Economic Value of a College Degree
1 Million And More